[Andrew: Starting up from zero is one of the hardest things you can do with a new product. Especially in the age of SaaS and content marketing, building up to the first 150k users is a key milestone that can prove out product/market fit, generate a revenue stream, and secure investment. This is a guest post by my good friend Noah Kagan (@noahkagan), who is previously from Mint (acquired by Intuit), Facebook, and now Chief Sumo of AppSumo. They are releasing some marketing tools focused on early traction companies, over at SumoMe.com]

Zero to 147,973 email subscribers by Noah Kagan, AppSumo

During the first 10 months of 2012 AppSumo grew 147,973 new subscribers from running Giveaways. What started out as an experiment for growing our small audience became one of the key marketing activities that helped grow our customer base.

Growing your audience in the early days is one of the hardest things in any startup. There are a few tactics to get your first customers such as buying ads to landing pages via Facebook or Google, content marketing with a blog, getting covered in press, a Kickstarter campaign that magically takes off or creating a YouTube teaser that goes viral.

The majority of these methods can be costly and / or time consuming. As well, there’s no guarantee that the customers it generates will be profitable or you’ll be able to even get customers at all.

So where is the best place to begin? If you look at all the marketing activities available when starting out, it looks like a pie. No one piece of that pie will get all of the customers you want or be as effective for you as it is for someone else. So you have to attempt multiple methods to eventually reach all of your customers.

AtAppSumo.com over the past 4 years we’ve done all of the above. The one method I can consistently recommend for people starting their customer base has been giveaways.

What the heck is a giveaway?

Good question.

A giveaway is giving away some physical, digital item or service to people in exchange for a visitor signing up for your newsletter. At AppSumo we further incentivized those customers with getting additional entries by referring friends via Facebook, Twitter or sharing an incentivized link however they please.

Here’s a recent giveaway we are running for AppSumo. The tool we are using is KingSumo Giveaways that we released to the public a month ago.

For this Giveaway we generally seed the initial users in hoping it goes viral.

First I’ll tweet or email a few people who I think will be interested.

Then people will see that and enter the giveaway.

Afterwards they’re incentivized to share:

The timer encourages urgency so people are incentivized to share sooner.

Then we’ve optimized which buttons to show and where so people will share the giveaway so we can get even more people to join.

Giveaways vary in performance but let me repeat that they are one of the most cost-effective ways of getting new customers.

Let me show you some exact statistics from AppSumo doing over 25 giveaways in the past 4 years:

528,238 total subscribers

$866,265.69 in revenue

$442,802.72 in gross profit*.

*This does NOT include unsubscribes / email-removals or the costs of the giveaways.

Here are some stats based on giveaways that had at least 1,000 unique entries.

Overall profit per subscriber across all Giveaways

The average is $0.83 gross profit per new subscriber

Biggest flop of a giveaway based on gross profit per new subscriber:

Giveaway 2 Macbook Airs

48187 total new subscribers

$11,550.08 gross profit

$0.24 gross profit per new subscriber

Cost of laptops: $2400

ROI: 4.81X

Best giveaway based on gross profit per new subscriber:

Monthly1k Entrepreneur Getaway

3846 total new subscribers

$26,572.90 gross profit

$6.90 gross profit per new subscriber

Cost of Giveaway: $2500

ROI: 10.62X

1- Buy facebook ad traffic against the company you are sponsoring or towards your target audience. We’ve seen CPAs lower than our regular ad buying.

2- When doing a giveaway try to co-partner with a company so they’ll promote for you and you can promote their product.

3- Giveaway a smaller more related item to your audience versus a broader item like Kindle, Laptops or Netflix subscriptions. For example, iPads got us a ton more emails but profit is what pays the bills and our entrepreneur giveaway was 2.3x more profitable.

4- AB test your messaging for giveaways. The message people share for your giveaway can have a huge impact on the vitality. Try variations to see which gives you the biggest boost.

5- Most giveaways get 25-40% new subscribers for email your list so don’t worry about your overall unsubscribes and promote your giveaway to your email list.

7- There’s a diminishing marginal return to doing Giveaways so don’t do them weekly. I recommend doing them quarterly.

Overall, Giveaways are a great tactic in your marketing arsenal. Use it and let us know how it works out.

If you haven’t run a giveaway you should. Just for readers of Andrew Chen’s blog for the next 48 hours we are doing 50% off the normal price. After that it goes back to regular. Use code (ANDREWCHEN) at KingSumo Giveaways.